Profiting From A Pharma Panic

A Pharma Panic That Could Pay Us

Executive orders often move markets before move policy is implemented. Late Sunday, President Trump said he'll sign a Most‑Favored‑Nation (MFN) order forcing U.S. payers to match the lowest price any country gets for each prescription drug. Asian investors heard that and immediately slammed Japanese pharma stocks 5‑7 %. If the pattern holds, U.S.‑listed drug makers will open in the red when Wall Street rings the bell.

My read: a knee‑jerk sell‑off would be a gift. The MFN idea died in the courts four years ago and may take months to resurface in enforceable form. Meanwhile, global manufacturers have an obvious counter‑move: pull supply from the handful of ultra‑cheap markets (looking at you, Czech Republic) and re‑launch everywhere at a single, slightly discounted list price. Net revenue changes little; headline risk does all the damage.

Below are the two ways I plan to monetize that dislocation.

Company A – Platform Cash Machine With Royalty Armor

• Fundamentals
  • Piotroski F‑Score 9 / 9 – pristine balance sheet, rising margins, no accounting red flags.
  • FY‑24 royalty revenue +27 % y/y; operating cash‑flow margin 45 %.
  • Net debt: $‑170 M (yes, net cash) after another quarter of buybacks.
• Technicals
  • Price has stair‑stepped higher since October. 
  • Price is above both 50 and 200 day moving averages – a textbook rising channel.
• Why MFN risk is minimal
  • Company A doesn't set list prices; its drug‑delivery platform earns a mid‑single‑digit royalty on net sales paid by its partners.
  • Those partners are market behemoths—Johnson & Johnson, Inc. (JNJ), Bristol Myers Squibb Company (BMY), Pfizer, Inc. (PFE)—that can afford to yank products from low‑margin jurisdictions until pricing equilibrates.
• How I'm playing it
  • Bull‑put credit spread: Taking advantage of expensive puts to collect a net credit which we’ll get to keep if the stock doesn’t fall further over the next few months.
  • Equity kicker: Allocate part of that credit to Jan 2026 OTM calls. Theta from the spread finances the lottery ticket.

Company B – The Diabetes Moon‑Shot

This one is a pure speculative bet—but with asymmetric payoff.

• Catalyst
  • First‑in‑human trial just made its debut participant insulin‑independent after 30 years of Type‑1 Diabetes. Not only doesn’t he need to take insulin, but he doesn’t need to take any immunosuppressant drugs either. No safety issues so far. 
• Balance sheet
  • ~$800 M cash against a ~$400 M annual burn → roughly 24 months of runway with zero debt.
• Risk
  • Biology can always surprise.
  • FDA hurdles, capital raises if share price pops.
• Position sizing
  • Treat as a lotto ticket: less than 1% of portfolio in common shares—small enough to torch without blinking, big enough to matter if the therapy works.

Why I Like The Pair Trade

• Company A offers steady cash flow, strong technical momentum, and optionality via a low‑cost spread strategy.
• Company B is binary, but the upside—an outright cure for T1D—is hard to overstate.
• Both should rebound once the MFN headlines fade and investors remember revenue isn't set by social media posts.

I have trades teed up for both names. If you'd like to know the tickers and get an alert the moment I pull the trigger, feel free to subscribe to my trading Substack/occasional email list below. 

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